Colorado and Alaska adopt centralized systems for local sales taxes
December 2020
Overview
In the two years since the US Supreme Court decided Wayfair, some states have sought to simplify complex local sales and use tax requirements. Of those states, Colorado and Alaska in 2020 adopted centralized taxing and remittance systems to address challenges facing businesses subject to the taxes.
Colorado partnered with third-party providers to create a new sales and use tax portal for companies to remit sales and use taxes to all participating jurisdictions. Alaska localities have joined a statewide intergovernmental agreement to administer sales and use tax functions.
The takeaway
Taxpayers with multistate sales are grappling with the complexity of filing sales and use tax returns in local taxing jurisdictions. Colorado and Alaska are acting to reduce this burden by centralizing their local tax administration. Although taxpayers may welcome these states’ efforts, the transition phase from the old to new systems may require updating compliance policies and procedures.
Due to current budget concerns, tax authorities have begun to notify sellers that they may be required to register to collect and remit tax. Companies can seek to stay in compliance with filing requirements by addressing any state or local tax notifications and monitoring city-by-city adoption of centralized tax systems, local economic nexus thresholds, and registration deadlines and grace periods.
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